The Gold Report's  Instablog

Source: JT Long of The Gold Report (5/6/13)

http://www.theaureport.com/pub/na/15235

Money: mining companies need it and investors want to know what companies will use that money to make them money. An innovative conference sponsored by the Society for Mining, Metallurgy and Exploration (SME) called "Current Trends in Mining Finance-An Executive's Guide: What Are Lenders, Investors Looking For?" brought together about 145 experts who were actively funding and running companies for answers. In this interview with The Gold Report, SME Executive Director David Kanagy and Conference Co-Chair Tim Alch share some insights about alternative funding that could help more companies survive the year.

The Gold Report: You put on a two-day conference last week in New York, "Current Trends in Mining Finance-An Executive's Guide: What Are Lenders, Investors looking For?" Why this topic now?

David Kanagy: SME has held some financial conferences in the past, but it has been more than 10 years since the last one, so it was time. The program was intended for senior executives and mining industry specialists, bankers, analysts and investors. It covered project evaluation and executive decision making, mergers and acquisitions, tax and accounting issues, resources and reserve reporting, and other risk factors that are making the current financial market for the minerals industry a bit difficult right now.

TGR: What has changed in the market since 2008? Is this really the worst market you've seen or does it just feel like that?

Tim Alch: The market rebounded nicely immediately after the 2008 financial crisis largely as a result of China's continued growth. However, in the last two years China has been perceived as slowing from an average of 10% gross domestic product (GDP) annual growth to something approximating 7-7.5%. This growth is on a larger GDP number, however, which is important to understand.

Today, we are also concerned about the European market and, most immediately, price support in the commodity sector. Over the last 10 years, costs of production have been steadily rising so there is considerable concern right now that the strong pricing environment the metals and minerals sectors enjoyed may be subject to pressure. The environment has become very selective and risk-off, particularly in the global mining finance space in the past 9-10 months.

The financial markets impact lending and investor appetite for risk. Luckily alternative sources of capital are stepping into the fray. Private equity, as well as sovereign wealth funds and state-owned enterprises from Korea, Japan and China, are now investing in natural resources.

TGR: Are countries looking to secure access to coal, oil and base metals to fund future growth or are they looking at it purely from a return on investment standpoint?

TA: In certain sectors and geographies, stability and security of supply of raw materials is a concern and it is driving certain parties to invest with just more than internal rate of return concerns.

TGR: Where is this supply security showing itself to be most important? Base metals, rare earths, gold? Are they looking for short-term fixes or focusing on long-term security?

DK: All of the above. Every sector has its own challenges. It's a difficult and a complex market right now. No one (with the exception of strategic long-term investors) is looking to long long-term greenfield investment projects. The ones that will get the best funding right now are more short-term opportunities that could get an immediate return or a greater return over the next few years.

TA: Some enterprises, including electronics companies or automobile manufacturing companies or even steel industry producers, have in the last several years made strategic investments in projects, properties and resources to ensure that they have a stable supply of various industrial minerals, including copper, iron ore, rare earths and the electronics metals, as a result of their need to ensure that they will have a steady supply.

TGR: If these alternative funding sources are looking for short-term needs rather than long-term payoffs, does that mean that the producers will recover faster than the explorers?

DK: I would say that that's a true statement.

TA: What is of interest in the space today are brownfield expansion projects as opposed to the greenfield or exploration-oriented projects. Those projects that are adjacent to existing properties or operations and that are clearly identified as being low-cost are seeing money continued to be invested, but it is on a very selective basis.

TGR: Is that also true of gold and silver? Is there interest in precious metals exploration projects? And, if so, is there more interest in certain parts of the world?

TA: There is still interest in the precious metals sector as a store of wealth due in part to inflation concerns within the current monetary easing policy. But investment is going into jurisdictions with stable, secure political environments that are less subject to changes in rules and regulations to delay projects from advancing.

TGR: Previously, you listed the different alternative funding sources; did the conference cover streaming and royalty companies? Have they been a factor in keeping the lights on for mining companies?

TA: Yes, streaming, forward sales and alternative sources of capital were discussed along with private equity.

TGR: Crowd-sourcing is something new in the finance sector. Is it part of the mining sector or is it just talked about more than it is being done?

TA: My sense is that it's too early in the mining and minerals space to say if it is actually having an impact. We are still largely dependent upon traditional sources, as well as the alternative sources, including forward sales, royalties, streaming, private equity and the sovereign wealth funds, as well as state-owned enterprises. Remember mining is a capital intensive sector.

TGR: On the royalty and streaming side, a number of new, smaller players doing small deals have joined the big royalty companies. Do you think that's a sign of that market maturing? Will there be even more companies coming into the space or is there only so much room and we can look forward to consolidation in the royalty space?

DK: My sense is that there's more interest in greater participation by a greater number of players in the royalty and streaming space because there's opportunity and need for it. Where there's opportunity and margins are still realizable, that's where the capital is going. A lot of these are very one-off type of situations. But a few larger ones, including Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) and Silver Wheaton Corp. (SLW:TSX; SLW:NYSE), have been successful. They're tapping an opportunity with their expertise, as well as the capital they have available. I think royalties and streaming are going to play a greater part down the road.

TGR: What about private equity? Is that becoming a more important source of funding?

TA: It is because certain informed, long-term or long-only investors perceive value in the space. The equity valuations in the mining and minerals space have become so depressed in the last year and certain private equity investors see an opportunity.

TGR: Are there things companies can accomplish with private equity that might be more difficult in the public market?

TA: Companies can tailor the relationship from the beginning between management and the private equity sponsor. The long-term support that comes with that relationship is also very important in an environment like this.

TGR: There has been quite a bit of debate about what's going to happen to all the junior mining companies on the TSX. Some have said that as many as 500 companies listed on the Venture Exchange are going to go out of business in the next year. Will all these alternative sources of funding allow more companies to get through this difficult funding period?

DK: There will be some contraction, but I am hopeful and don't think it will be on the massive scale you've just mentioned. People are very cautious right now. Companies seeking or in need of capital in the current environment will have to demonstrate that a project has possible returns in the next 2-3 years rather than 10-20 years out.

TA: Low-cost operations and production is paramount to attract investment. If a company can demonstrate high-grade quality of resources in the ground that can be produced at low costs within the first or second quartile of industry cost curves, those projects are better able to raise capital and find interest among the investment community.

TGR: Is that even more important with the institutional audience? Are institutions getting back into this market and, if so, what will it take to keep them there?

TA: The intermediate to long-term outlook-even the near-term outlook-for the mining sector is very favorable, but it needs to be carefully scrutinized and I don't think the institutions have walked away. They are just sharpening their pencils like all investors today and making sure that they will see a return. The fundamental long-term story for raw materials, metals and minerals is intact on a macro basis worldwide. Growth in emerging markets-where demand for raw materials on a per capita or growth of GDP basis is greater than in the developed nations-is intact and likely will continue growing at above average rates.

DK: You started the conversation by asking whether these are the worst conditions the metals market has seen, and I would say they are not. It may not be as lucrative as it was two or three years ago. It's more difficult now, but I don't think it's the worst we've seen. But it is changing and I think the investors and lenders are asking more questions. People are doing better due diligence, asking more questions-questions that probably should have been asked many years ago. Now that the need for a return is paramount, investors are asking more and better questions.

TGR: We have talked about a number of different funding trends. What answers do you hope attendees came away with from your conference?

DK: We featured about 50 speakers in 17 panels on topics ranging from lending and financing to political risk. The 145 people attending heard from leading experts from the banking, financial and technical advisory sectors, as well as accounting, legal, political risk and social and local economic development experts who all shared what they are seeing today and how they are managing opportunities for investing or financing in the global mining sector. Many attendees expressed thanks and walked away saying they learned from the experiences and observations of others. All of which has encouraged the SME to have this conference again next year.

TA: This was more than just an educational seminar-it was a chance for investors to get real answers from experts about what they are doing right now.

TGR: Thanks for your insights.

Tim Alch is a vice president and senior minerals business analyst at Behre Dolbear & Co. (USA) Inc. Alch is an international business, investment analyst and consultant with 25+ years of experience working within business units analyzing prospective, operating, management, strategy, technical, technology, valuation, transactions and investment issues for industrial and financial clients. He was a senior vice president of Anderson & Schwab Inc. and equity analyst at Dean Witter Reynolds, Prudential Securities, Paine Webber and senior consultant and industry analyst at World Steel Dynamics, Resource Strategies, Inc., CRU Inc. (London), covering global precious, base and industrial metals and minerals, mining, steel, coal, energy and related sectors. He is an honors graduate of Amherst College in geology and studied the economic and political impact of the Industrial Revolution and modern economy on the global mineral and energy resource Sectors. He continued his studies in the Master of Science mineral and energy economics program at Penn State. Alch has been on the Executive Committee of the New York Section of SME since 2008 and co-chaired the "Current Trends in Mining Finance-An Executive's Guide: What Are Lenders, Investors Looking For?" conference.

Dave Kanagy is the executive director for the Society for Mining, Metallurgy and Exploration, which is located in Englewood, Colorado; he joined SME in March 2004. Kanagy has worked over 29 years with nonprofit organizations. He has a Bachelor of Science degree in industrial education from the University of Maryland and a Master of Science degree in technology education from Eastern Illinois University. Kanagy is also a certified association executive by the American Society of Association Executives. He has also completed a six-year association management-development program from the University of Delaware's Institute of Organizational Management.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:
1) JT Long conducted this interview for The Gold Report and provides services to The Gold Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Royal Gold Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Tim Alch: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) David Kanagy: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
5) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
6) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
7) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise - The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110
Petaluma, CA 94952

Tel.: (707) 981-8999
Fax: (707) 981-8998
Email: jluther@streetwisereports.com

Source: JT Long of The Gold Report (5/3/13)

http://www.theaureport.com/pub/na/15233

When the metals markets tumbled in mid-April, The Gold Report reached out to "the original investor bug" and author of The Dines Letter, James Dines, for perspective. He predicted a crash in commodity prices two years ago based on his analysis of a weak Chinese economy. Next, he says, will be a bond market bust once interest rates start to climb. This will lead to "a stampede to get out of bonds like a herd of elephants attempting to exit through a revolving door." How can investors protect themselves? That is Dinesism #38.

The Gold Report: What does it mean that leading stock market averages have been in Uptrends, while commodities markets are in Downtrends?

James Dines: Our "Sell" signal on China's economy in The Dines Letter (TDL) of Sept. 16, 2011, is still stubbornly resisted by the mainstream press, which instead persists in calling for 7.5% growth by China Since we perceive China as a barometer for the commodities markets, it followed that there would be a decline in raw-materials prices.

We find it astonishing that we seem to be the only voice in the world's mainstream press calling commodities markets in the last two years "a crash." Cotton down 70% from its high is merely one example. It's not in the world's headlines yet, but we find it remarkable that virtually all commodities are down, worldwide, even including precious metals, oil, uranium and rare earths. How could leading market averages be in Uptrends, presumably forecasting a business upturn, even while commodities have plunged? After all, to market things, they need to be made, with commodities, do they not? China was the biggest consumer of commodities, so we infer China's economy is in trouble, especially its banks and real estate, as predicted in our 2013 Annual Forecast Issue (pages 26-29; also The Dines Letter of Mar 15, 2013, page 7). So our next "Buy" signal on China will be crucial in attempting to discern the cyclical advent of the next raw-materials upturn.

Because of excessive government interference with interest rates, those desperate for income-including pension funds-have pushed prices of virtually all secure sources to nosebleed heights. When the Fed eventually does raise interest rates, the bond bubble will be pricked and the stampede to get out of bonds should be like a herd of elephants attempting to exit through a revolving door. What to do in such a bond market crisis? Aside from TDL's blue-chip recommendations, we always recommend dispersing assets in several "friendly" countries. Also, diversifying in golds and silvers, including Saint-Gaudens double-eagle gold coins, rather than just keeping capital entirely in fiat currencies.

The world is in what we call "The Second Great Depression," comparable with the first one, in the 1930s. As laid out in my final business book, "Goldbug!," doubling the money supply in 1922 to pay for World War I caused a great inflation that after 1929 was corrected by the First Great Depression, in the 1930s. The similar printing of enormous quantities of paper money, not backed by anything except more paper, has also resulted in the current Great Deflation, still deepening, worldwide. The soup kitchens of the 1930s have been replaced by food stamps, but the resemblance is not coincidental.

Realizing that Keynesian economics failed to end unemployment after the 1932 crash, until World War II began around 1940, enabled us to predict with specific clarity that it would not work these days either. Indeed. Historically, large quantities of printing-press money has failed to reduce the downward trend of Americans with jobs in recent years. Few believed our prediction of "The Coming End of the Age of Jobs," or that it would lead to "The Coming New Social Order," but it is already unfolding. Unemployment in Europe already ranges between 20% and 50%, depending.

It is difficult for investors to protect themselves in this situation, but we cover it as best we can. We have recommended blue-chip stocks that have a dividend yield higher than that of U.S. Treasury paper, because they are proxies for institutions seeking to park their cash in areas other than overpriced bonds. That should end when the Federal Reserve finally allows interest rates to rise, but its fanaticism in continuing to suppress rates despite the Keynesian method not working represents a triumph of hope over experience-and will not end well.

Especially shocking is the delusion that adding inflation to a deflation would somehow cancel each other out, but is in fact the futile attempt to cure a problem with its cause. Overprinting paper runs at increasing risk of an eructation of "hyperinflation"-please note it is a word not used anywhere in the mainstream press these days. Predicting a hyperinflation is so daring in today's environment that we might be mistaken, so we will have to get closer toward the end game to be more confident of it. We hope we are mistaken.

TGR: What will be the next big sector?

JD: We refer you to Dinesism #38, of the 65 that guides our methodology: "Rich or poor it's good to have a lot of cash." And you may feel free to quote us on that. Also, parking some long-term capital in gold and silver, especially during pullbacks, would be useful if a hyperinflation eructs.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline and The New York Times, among others.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:
1) JT Long conducted this interview for The Gold Report and provides services to The Gold Report as an employee.
2) James Dines: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions.
3) Streetwise Reports does not make editorial comments or change experts' statements without their consent.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise - The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110
Petaluma, CA 94952

Tel.: (707) 981-8999
Fax: (707) 981-8998
Email: jluther@streetwisereports.com

Source: Brian Sylvester of The Gold Report (5/3/13)

http://www.theaureport.com/pub/na/15232

Investors were shaken by the market's death-defying drop and recovery in a matter of minutes recently. But the "tweet retreat" hasn't changed the reasons why investors need gold companies in their portfolio. Ryan Walker, a mining analyst with Casimir Capital in Toronto, tells investors to look past the headlines to what underpins the market. In this interview with The Gold Report, Walker says that all that cash pumped into the economy at some point has to start driving inflation.

The Gold Report: Casimir Capital adjusted its metal price forecasts after the recent drop in metals prices. What are your near-term numbers for gold and silver?

Ryan Walker: For the remainder of this year, we're forecasting $1,600/ounce ($1,600/oz) gold, then $1,700/oz next year and $1,800/oz for the subsequent two years. Long term, our price assumption is $1,400/oz.

For silver, we forecast $28/oz for this year, $30/oz next year and $33/oz for the subsequent two years. Our long-term price is $26/oz. Unfortunately, we put these out before the big crash in gold and silver. We missed that event in our forecast.

TGR: What's underpinning that bullishness?

RW: According to some reports, there's been some $6 trillion in quantitative easing over the past few years. At some point, inflation is in a real way going to kick in. It's been kept at bay so far, but inflation has got to send gold higher. While mechanisms exist to fight that, it is hard to see inflation not happening at some point. The big question is when, not if. We're bullish on gold, but we've tempered our expectations to reflect the current market.

TGR: Many precious metals investors are still reeling after that dramatic drop in the price of gold in mid-April. What happened there?

RW: It was a confluence of events. There were reports Cyprus would be required to sell gold as part of its bailout package. Some members of the Federal Reserve were hinting that it might be time to end or slow down the pace of quantitative easing. A couple of the major banks in the U.S. recommended going short gold. It all came together to spook an already jittery market. Exchange-traded funds are so easily traded that things start to trade through stop losses and cascade and feed on themselves and become a self-fulfilling prophecy.

As an example of how quickly things can move nowadays, the Dow Jones Industrial Average recently dropped 130 points in the span of about a minute on a false Twitter headline from the Associated Press that there were explosions at the White House. Then it popped right back up to where it was-all in less than five minutes. That's the kind of world we're in.

TGR: Should investors expect similar price shocks in the near and medium term?

RW: The potential is out there for it. Can you call the kind of thing that happened to the Dow recently? I don't think so. Have the fundamentals for gold changed? I don't think so.

TGR: Did what happened make you more of a conspiracy theorist about gold price manipulation?

RW: No, but you can definitely see where conspiracy theorists are coming from. Maybe it does make you wonder a little bit longer about some of those theories. But I think it was just the confluence of a number of factors that got things rolling, and then electronic trading just created a cascade effect.

TGR: Your coverage involves small-cap precious metals, mostly in the developer space. What's the essential investment thesis for those types of names?

RW: For the most part, I'm dealing with the explorers, emerging producers and developers. I look for something that's got potential to get big, an asset that would be attractive as a merger and acquisition (M&A) target. But if that doesn't happen, I look for something that could feasibly be put into production by a smaller company. With producers you look for the low-cost companies with solid balance sheets, but also companies that have some real legs to them, preferably somewhere in a safe jurisdiction.

TGR: What's your preferred valuation metric for junior explorers?

RW: A lot of people use Enterprise Value per ounce as an initial filter, which is fine for that purpose. Not all ounces are created equal, however. Generally, an ounce of sulphide gold requires more work to recover compared with oxide ounces, where recoveries can be easier and sometimes you don't need to go and build a big mill. Do you really value both those types of ounces the same way? You have to look at the whole picture-jurisdiction, management deposit type, metallurgy, etc.-there is no one magic bullet.

TGR: Has the recent dive in precious metals prices put further financing pressures on the explorers?

RW: Sure, but it is always an issue for them. I like to look for big deposits that can help self-finance, that might have by-product credits that could be sold forward. If a gold deposit has some silver, a company can sell forward the silver to fund the gold part of the deposit.

TGR: What are three strong narratives in the developer space?

RW: I like to look for projects that can get big and that have legs, scalability, development options and by-product credits, if possible. A good example and the one I am most excited about right now is Probe Mines Limited (PRB:TSX.V). The company's Borden Gold deposit in Ontario has had success pretty quickly. It was discovered in late 2010 and it is already up to 4-6 million ounces (4-6 Moz) gold, depending on the cutoff grade you apply.

"Investors should not just read the headline numbers - read through press releases and the actual tables of drill results."

Some say these big, low-grade deposits are out of favor right now-that's quite true-but Probe has a couple of characteristics that help it stand out. The deposit has a higher-grade core that runs right down the middle. The bulk of the deposit is running at around 1 gram per tonne gold (1 g/t). The higher-grade core is up around 1.6 g/t. That gives Probe a bit of flexibility to go after the higher-grade core first and then stockpile the lower-grade material for processing toward the end of the mine life.

The really exciting thing is that late last year, drilling to extend the deposit toward the southeast returned the type of hole I can't say I've seen in some time-51 meters (51m) of 10.3 g/t. And, that was NOT influenced by, say, a 1m section of 800 g/t-it wasn't a case of grade smearing. Probe more recently did some follow-up drilling and the first two holes-and mind you this is a 500m stepout from that initial hole-boom! Drill results came back just shy of 13m at 7.4 g/t and another at 10.2m of 12.5 g/t. Those are fantastic results!

The market shrugged it off on the back of the declining gold price and some warrant overhang holding the stock back. It was ignored wholeheartedly.

TGR: Explain grade smearing and how investors can identify it.

RW: I would encourage investors to not just read the headline numbers, but go down and read through press releases and the actual table of drill results. That headline might say 150m at some flashy high-grade number, but more often than not there are smaller subintervals included containing much higher grades, disproportionately influencing the overall average. When they're averaged, it makes the whole story sound good.

When I first saw that Probe hole I mentioned earlier, I thought, "That's crazy! That can't be." But the drill result table showed it WASN'T being influenced by a single narrow, very high-grade interval.

TGR: Those stepout drill results would seem to indicate further exploration potential. How important is that to a potential suitor?

RW: The deposit has 4-6 Moz, so you know it's a big plumbing system to be able to pile up that much gold. The bulk-tonnage target and high-grade core have shown good continuity. We're waiting on results from additional ice-based holes sunk this winter further southeast and they could be the game changers. It looks as if Probe has tapped into a high-grade feeder system toward the southeast. That changes the complexion of the story from bulk-tonnage and low-grade to high-grade, and, importantly, so far over some nice wide intervals. All that, and the company still has a large little-explored land package.

Probe is worth a look. With $30 million ($30M) on the balance sheet, the company should at least be funded through the end of this year. No jeopardy of running dry on funds.

TGR: What's another story you are following?

RW: Atacama Pacific Gold Corp. (ATM:TSX.V) has a nice large oxide gold deposit in Chile. The processing is much easier. It is an open-pit, heap-leach opportunity with 3.5 Moz in pit. It is low grade at about 0.5 g/t, but the key is its oxide gold.

"The plunge happened in the blink of an eye, but I don't expect the recovery to do the same thing."

Atacama came out with a preliminary economic assessment earlier this year with robust numbers. In the first five years, the company will produce about 300,000 oz gold/year. Its after-tax net asset value is $531M at a 5% discount rate. It has a 26% internal rate of return, which is above the benchmark of around 20% that most companies are looking for in a M&A scenario.

The key issue for this one is water, because it's situated in Chile's Atacama desert. Atacama has drilled some aquifers and hit some water. The initial flow rates look good. Once that gets settled, it should help the story.

TGR: There are a few majors in the area. Kinross Gold Corp. (K:TSX; KGC:NYSE) has projects nearby, but things aren't going so well for it right now. Do you see Atacama as a takeover target?

RW: It's certainly on the radar screen, but the big hitch is the water. I don't think it will be touched until that is sorted out.

TGR: Are the locals on board at its Cerro Maricunga project in Chile?

RW: There really aren't any locals to speak of. It's a pretty remote region that is not agricultural by any means.

TGR: How much cash does Atacama have?

RW: At the beginning of the year, the company had $20M. It's nicely situated to keep going for quite a while. It's doing in-fill drilling, some engineering studies and metallurgical work.

TGR: Are any other companies interesting right now?

RW: Treasury Metals Inc. (TML:TSX) outside of Dryden, Ontario, is one I initiated coverage on recently. I've been to a lot of sites over the last 15 years and the infrastructure here couldn't be better. It's literally a stone's throw off the Trans-Canada Highway, a former government tree nursery left several useable buildings on site, and there's high-capacity hydro-wires crossing near the planned pit area. Also, a natural gas pipeline cuts across the property. You couldn't ask for a better set-up.

A lot of people up there looking for jobs would love to see this mine up and running.

This project doesn't yet have the size that some deposits have-it is about 1.7 Moz gold equivalent-but it does have some silver. Treasury can't totally fund the project on the back of the silver, but it could sell the silver stream and reduce the equity portion of the capital expenditure (capex). It is a nice story with very good exploration potential.

Treasury recently enlarged the land package. It's done some regional drilling that generated some whiffs of smoke, but no real barn burner of a hole yet.

The pushback on this one would be the strip ratio, the ratio of waste to ore taken during open-pit mining, which is pretty high. Drilling has been hitting a second, parallel zone. The more it hits that and can flesh that out, it will help reduce the overall strip ratio.

The deposit has a manageable capex for the open pit at just more than $92M.

TGR: Is that realistic? I mean $92M sounds really low.

RW: It's not a huge operation and it's got a head start with the infrastructure, so I think it's a reasonable number. The plan is to get the open pit running and cash flow going, and then fund the underground development out of cash flow. You can make good money off of this and use it as a springboard.

TGR: We've seen some of the bigger players make strategic investments in a number of these smaller companies: Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) and Sulliden Gold Corp. (SUE:TSX; SDDDF:OTCQX; SUE:BVL). Does Treasury have any major investors with a significant slice?

RW: No, it doesn't. It's really interesting how Agnico is taking these toe holds at bargain basement prices. It is locking in a 10% stake now-maybe it will miss a little bit on the downside if the gold price goes any lower, but it is locking in these interests and can either consolidate ownership later on or make a nice little profit down the road.

One that I don't officially cover but have been keeping an eye on is WCB Resources Ltd. (WCB:TSX.V). This one goes back to looking for something that can get really big. The company has the old Placer Dome Misima mine in Papua New Guinea, which produced about 4 Moz. It is working on putting out a resource estimate by the end of next month. I think we'll see the 1 Moz mark to start with, but it looks as if that could just be the tip of the iceberg. The deposit has leftover gold that wasn't produced because gold was at $300/oz back then, so the company just shut it down.

The real blue-sky here is what's the underlying heat engine for the gold deposit? The project has some nice large-scale coincident geochemical and geophysical anomalies. It looks as if there's a big gold-copper porphyry below and some magnetite is associated with it. The magnetite is important because gold-rich porphyry copper deposits can be linked to elevated magnetite content.

I'm definitely keeping an eye out for the resource estimate-it may catch some people by surprise.

TGR: Not a bad place to do a site visit either.

RW: You are in the land of the giants there. Not to sound cliché, but that is elephant country. You've got Grasberg, Porgera, Ok Tedi, Lihir and several others-and WBC is right in the trend with those.

TGR: How does a little company get an asset like this?

RW: The chief executive officer, Cameron Switzer, has been involved in the project for quite some time, brought it to Pan Pacific Copper Co. Ltd. and they partnered up after Placer Dome left it in the early 2000s.

TGR: How are the locals with regard to development? The Grasberg district certainly had some problems in the last few years.

RW: There are no immediate local villages, but the company is still trying to do the right thing by employing locals.

TGR: The precious metals space is generally quieter in the summer. What should investors expect this year?

RW: I wish I knew. The plunge heading into summer is an interesting set-up. I don't expect a massive rebound over the summer; the plunge happened in the blink of an eye, but I don't expect the recovery to do the same thing. It will be a slow and steady rise back up. Ultimately, I have to believe this massive money printing campaign that's been going on has got to come home to roost in the form of inflation. That's got to send gold higher.

Ryan Walker joined Casimir Capital as a mining equity analyst in October 2012; he previously served in a similar position at Jennings Capital and as a research associate at Wellington West Capital Markets. Prior to that, Walker has seven years of experience reporting on the mining industry for a well-respected trade publication. He holds a masters degree in geology from the University of Windsor.

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